Greek Debt Crisis Continues To Trouble The Western World
Economists in a Reuters poll painted a bleak outlook for Western economies, in the midst of plunging U.S. stocks and protests in Greece, some of which turned violent in the capital city of Athens. The unrest caused Greek Prime Minister George Papandreou to offer to step down.
The protests were fueled by resistance to austerity measures meant to put it on firmer fiscal footing. Other members of the EU may find the Greek protests in bad taste, as the rest of the Union’s member-states get their credit ratings dragged through the mud by the Greek debt crisis.
Though President Barack Obama’s administration continues to tout its dedication to economic growth and job creation, unemployment remains close to 9 percent and investors appear uncertain of the West’s fiscal future.
Wednesday’s U.S. stock market plunge was likely due partly to the Greek situation, as the Wall Street Journal reported:
"The stock market doesn't like rioting—it never does and it never will," said Jeffrey Friedman, senior market strategist at Lind-Waldock, a division of MF Global. "The guys with the cigars say, "I don't like this. This is making me uncomfortable. It's time to get to the sidelines."
Some may wonder how it is that the Greek debt crisis and its impact on the EU could cause the US economy to dip, which some investors and economists fear could lead back into the depths of recession.
“We are not insolated,” said Aris Protopapadakis, a professor at the University of Southern California and an expert in international finance. “The worst scenario would be that we dip back into a recession, the world is very interconnected."
“The American situation bears no similarity to Greece,” Protopapadakis added. “If we do anything stupid we are going to do it to ourselves.”
That depends on what constitutes “stupidity” and whether or not Americans are doing it to themselves.
According to the AFL-CIO:
“According to the Federal Reserve, U.S. corporations held a record $1.93 trillion in cash on their balance sheets in 2010. But they are not investing to expand their companies, grow the real economy or create good middle-class jobs. Corporate CEOs are literally hoarding their company’s cash—except when it comes to their own paychecks.
“In 2010, Standard & Poor's 500 Index company CEOs received, on average, $11.4 million in total compensation— a 23 percent increase in one year. Based on 299 companies’ most recent pay data for 2010, their combined total CEO pay of $3.4 billion could support 102,325 median workers’ jobs.”
Some say the situation in Greece could serve as a cautionary tale to other Western states, if only Greece didn’t seem to be dragging those other states down with it.
As Reuters notes, Greece has become the world's lowest-rated country by Standard & Poor's at "eight notches below junk status."